Hard Red Winter wheat firmer

Kansas was driving the bus last night posting solid gains and outpacing all the other commodities.

KW has been maintaining near record short positions from the spec community for some time so the timing of last night’s rally is interesting.

Yes, there was some extreme cold through the wheat belt in the US but the reality of meaningful damage at this stage of growth is very small.

Technically, Kansas wheat has been edging up to some key levels, most notably is the 100-day moving average.

Now, I’m not discounting the fact that the domestic cash markets have been firming and calendar spreads have been clearly indicating fundamental strength, however, this rally was all about the charts.

When the spec is short and the market trades through some significant technical levels wheat gets a rattle on.

I was told many years ago that wheat futures only job is to cause the most pain possible – based on positioning a higher move achieves this.

The bigger question now is can we sustain these levels. The rally moves HRW out of the export discussion – but we can maintain that for a while.

The spec would still be short and, again, from a technical perspective another higher close would most likely get another round of short covering.

Add to this the fact that new crop planting is going to be record small and there is enough for both sides of the market to have the argument.

Soybean/canola market prespective

The world outside wheat is a mixed bag.

Slow Brazilian soybean planting pace (58pc complete vs 62pc 5-yr average) has been, from a market perspective at least, offset by aggressive Argy sales.

We will fall short of suggesting this means the Argy crop is going to be a bin buster.

The change in government is more likely to have prompted the grower to get their selling boots on with increased concern around export tax hikes.

EU canola keeps pushing higher – unquestionably driven by fundamentals.

Their short production problems have, in part, been compounded by a shorter Australian crop and given the ancillary problems with GM vs non-GM in EU plus the sustainable seed requirements, the trade flows become messy and difficult to solve.

The USDA suggests the EU needs to find 5.1 million tonnes – Ukraine, Australia and Canada the providers.

Impeachment enquiry and China/US trade

We have been promised a circus in the form of an impeachment inquiry and that’s what we are getting.

Yesterday was oddly quiet but today we are back to both sides of the political coin jockeying for the front page.

The biggest driver in both commodity and financial markets at the moment is the China/US trade relationship which, simply, is being driven by Trump.

The significance of the impeachment inquiry to the trade negotiations is difficult to extrapolate but would at a minimum be a distraction.

There is more to come but the sentiment on who has the upper hand on impeachment will unavoidably spill over to sentiment around the trade negotiation.

Australia

Aussie cash markets were stronger on the boards yesterday up $2-3/t while canola was up $4-5/t leaving Port Kembla track around $655/t for non-GM.

Aussie balance sheets remains tight and early quality coming off has been okay with reports of yields through NSW ranging from 1-1.2t/ha and oil averaging 40pc.

Sorghum markets in the north continue to strengthen on the back of minimal planting intentions from farmers as forecast remains dry and planting window crunches in.

Delivered Downs sorghum values for new crop currently pricing $10/t under wheat, if conditions remain dry and the market doesn’t see a substantial plant we could see sorghum trade at a premium to wheat.

Do Consumers now look to readjust their feed rations.

Harvest pace continues at a snail pace in the south as temps remain in the low to mid 20s.